Basic dissimilarities between the dynamic Leontief model and van Neuman’s model
The dynamic Leontief system is an extension of the static input-output system of inter-industry analysis to the dynamic or intertemporal case. Like the static model, the dynamic Leontief model has found wide application in empirical analysis.
Leontief system is characterised by having a single production process available for the production of each good. This is the fixed coefficients assumption. The dynamic Leontief model is one where the production function is of fixed coefficients form of the type:
The basic idea in dynamising the static Leontief model seems to have come from the Harrod-Domar model. Therefore, the assumption of fixed capital coefficients • is essential in the model.
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Von’s model is a generalisation of Leontief- type system to permit joint production. It also suggests the relaxing of the condition of a fixed ratio of inputs to outputs, though even here in the basic set-up goods are produced from other goods by processes or activities of the fixed coefficients type.